Dollar Weakens as Fed Cut Bets Build and Trump Pushes Influence Over Policy

Economic

Summary:

The U.S. dollar slipped on Thursday as traders raised expectations of a September Fed rate cut, while political uncertainty grew after President Trump’s bid to fire Fed Governor Lisa Cook heightened concerns about central bank independence....

Fed Rate Cut Bets Pressure the Dollar

The dollar index hovered at 98.135, extending a two-day decline, as traders increased bets that the Federal Reserve will cut rates at its September 16–17 meeting. New York Fed President John Williams reinforced the possibility of easing, saying every meeting remains “live” and policy decisions will depend on upcoming data.

Markets are now pricing an 84% probability of a 25-basis-point cut, with expectations of 56 basis points of easing by year-end. This shift drove two-year Treasury yields the most policy-sensitive maturity to their lowest since May, directly pressuring the dollar. Here, the relationship is causal: expectations of looser monetary policy depress yields, lowering the dollar’s attractiveness.

Trump’s Push Raises Concerns Over Fed Independence

Investor caution was amplified by President Trump’s escalating effort to influence the Fed. His move to fire Governor Lisa Cook and replace her with a loyalist has triggered a legal standoff, raising questions about central bank autonomy. Traders interpreted Trump’s actions as a push for more dovish policy, reinforcing bets on rate cuts.

The relationship here is both causal and correlational: Trump’s political pressure directly raises the likelihood of policy shifts, while also correlating with lower short-term yields as markets anticipate a more compliant Fed.

Currency Market Reactions

The euro rose 0.07% to $1.1646, despite France’s domestic political instability after its prime minister unexpectedly called a confidence vote. Sterling edged 0.03% higher to $1.3504, while the dollar slipped 0.11% to 0.8017 Swiss franc and weakened 0.04% against the offshore yuan to 7.1491. Against the yen, however, the dollar ticked up 0.05% to ¥147.47, reflecting mixed safe-haven flows.

The euro’s resilience highlights a correlational effect: U.S. political and monetary pressures overshadow European risks, supporting the single currency despite domestic uncertainties.

Geopolitical Backdrop Adds Noise

The dollar’s moves were also influenced by developments in Japan, where chief trade negotiator Ryosei Akazawa canceled a planned U.S. trip tied to the July tariff deal. The cancellation signaled unresolved administrative hurdles, adding to the broader narrative of trade-related uncertainty shaping currency markets.

The dollar remains under pressure as Fed rate cut bets accelerate and political uncertainty clouds the central bank’s independence. With key data ahead the PCE inflation index on Friday and payrolls a week later markets will closely watch whether incoming numbers justify the easing trajectory. Until then, the interplay between Fed expectations and Trump’s political maneuvers will continue to dominate dollar sentiment.

Source: Reuters

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Commodity

U.S. Demand Dynamics Shift After Summer Peak

Brent crude fell 0.46% to $67.74 while WTI slid 0.56% to $63.79, reversing part of the previous session’s 1% gain. The U.S. Energy Information Administration reported a 2.4 million-barrel draw in crude inventories, exceeding expectations of a 1.9 million-barrel draw, reflecting strong demand ahead of the Labor Day holiday.

Yet analysts caution that the holiday also marks the end of the peak summer driving season, a shift that typically ushers in weaker gasoline demand. Technical indicators show crude facing resistance at $64–$65, with potential support tested near $60, according to IG’s Tony Sycamore. This suggests that even with near-term demand resilience, seasonal trends are exerting downward pressure on prices.

India’s Russian Oil Purchases Defy U.S. Tariff Pressure

Markets are also digesting the geopolitical impact of U.S. President Donald Trump’s decision to double tariffs on Indian imports to 50% in retaliation for New Delhi’s continued purchases of Russian crude. While the penalties add to trade friction, analysts expect India to maintain Russian oil imports in the short term, citing cost advantages that outweigh tariff pressures.

This highlights a causal disconnect: the tariffs are intended to dissuade Indian refiners from relying on Russian crude, but the immediate effect is limited given India’s dependence on discounted energy supplies. Consequently, the anticipated hit to global supply may be muted, keeping downside risks to oil prices contained.

Geopolitical Risks Add Price Support

The broader geopolitical backdrop remains tense. Russia escalated attacks on Ukraine’s energy and gas transport infrastructure this week, striking six regions and leaving over 100,000 people without power. Such disruptions reinforce volatility in European energy markets and provide underlying support to crude prices despite seasonal demand weakness.

Here, the relationship is correlational rather than causal: while conflict heightens price risks, the actual direction of oil prices depends on whether attacks translate into sustained export disruptions, which has not yet materialized.

Monetary Policy Expectations Provide a Cushion

Oil prices also drew some support from speculation of a near-term U.S. interest rate cut. New York Fed President John Williams said rates are likely to fall eventually, though data in coming weeks will guide whether the Fed acts at its September 16–17 meeting. Easing policy would stimulate economic activity, indirectly lifting oil demand.

The connection here is causal, as looser financial conditions encourage investment and consumption, raising energy use. This factor may help limit oil’s downside even as seasonal trends drag on demand.

Balancing Seasonal Weakness with Policy and Geopolitics

The oil market is caught between seasonal declines in U.S. fuel consumption and resilient geopolitical risks tied to Russia-Ukraine tensions and India’s defiance of U.S. tariff pressure. While near-term demand is cooling, India’s continued Russian purchases and potential Fed easing may cushion the slide.

For now, oil prices appear range-bound, with investors weighing whether seasonal weakness or geopolitical disruptions will dominate the balance in the weeks ahead.

Source: Reuters

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Cancellation Signals Delays in Implementation

The sudden cancellation of Ryosei Akazawa’s U.S. visit underscores unresolved issues at the administrative level in implementing the July 22 trade deal with Washington. While both sides had announced an agreement, the U.S. has yet to follow through on commitments to reduce tariffs on Japanese automobiles and end the practice of tariff stacking, which Tokyo argues undermines the headline tariff cut.

Akazawa said on Wednesday that Japan expects the reciprocal tariff revision and car tariff cut to occur simultaneously, urging U.S. officials to act “even a day sooner, or even a moment sooner.” His cancellation suggests these terms remain under negotiation, delaying implementation likely into mid-September a timeline he previously hinted at by referencing the 54 days it took for the U.S.-UK deal to come into force.

Key Sticking Points: Car Tariffs and Tariff Stacking

At the heart of the dispute is Japan’s demand that U.S. car and auto parts tariffs be lowered from 25% to 15% and that stacked duties the layering of new tariffs on top of baseline 15% universal tariffs be eliminated. Japan also expects refunds of overpaid tariffs.

While the economic effect of tariff stacking may be minor in scale, the issue has become politically sensitive. Prime Minister Shigeru Ishiba, already under fire following a historic electoral setback, faces criticism that his government conceded too much in the deal without ensuring prompt implementation. He has vowed to remain in office to see the agreement enforced.

Investment Fund Adds Complexity

Another sticking point is the promised $550 billion U.S.-bound investment mechanism, designed to revive American manufacturing. Commerce Secretary Howard Lutnick suggested details could be announced later this week, but its operation remains opaque. Akazawa has downplayed expectations about direct investment through the vehicle, noting that proceeds are meant to be split 90:10 in favor of the U.S.

This model mirrors the U.S.-South Korea deal finalized in July, which included a $350 billion fund. Seoul has since pledged $150 billion in direct U.S. investments, highlighting the heavy political and economic commitments Trump’s administration seeks from allies.

Economic Stakes for Japan’s Auto Industry

Japan’s urgency reflects the centrality of the auto sector in its exports to the U.S. Automobiles form the single largest category, making tariff relief vital for manufacturers already contending with global demand weakness. Although Japan’s economy grew faster than expected last quarter, its overall exports remain in decline due to U.S. tariffs.

The causal relationship is clear: prolonged tariff burdens erode Japan’s export competitiveness, which in turn weighs on corporate profitability and broader economic momentum. Securing tariff reductions is thus both an economic and political imperative for Tokyo.

Strategic Uncertainty in Japan–U.S. Trade Relations

The cancellation of Akazawa’s trip highlights the fragility of the July trade deal and the complexity of negotiations under Trump’s tariff-heavy agenda. While Tokyo is pushing for swift action to support its auto industry, Washington appears focused on securing investment pledges first.

The outcome will shape not only bilateral trade flows but also the credibility of Prime Minister Ishiba’s economic leadership. For now, Japan must navigate a precarious balance: pressing for tariff relief to protect its largest export sector while managing political fallout at home and aligning with Washington’s industrial policy demands.

Source: Bloomberg

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Nvidia’s Earnings Surprise Fails to Lift Asia

Nvidia once again beat earnings expectations, reaffirming its position as the world’s most valuable company. However, its shares fell in after-hours trading as investors focused on its vulnerable China business, which remains entangled in U.S.-China trade frictions. Goldman Sachs analysts noted Nvidia had not shipped any H20 products to China last quarter, underlining regulatory pressure.

The result illustrates a causal disconnect: while Nvidia’s core performance continues to impress, elevated expectations and geopolitical risks around China are constraining investor confidence. Asian chipmakers in Korea and Taiwan, highly correlated to Nvidia’s demand cycle, were flagged as particularly exposed to any downside spillover.

Regional Equity Performance Mixed

MSCI’s broadest Asia-Pacific ex-Japan index slipped 0.2%, oscillating between gains and losses. Futures tied to U.S. benchmarks also softened, with S&P 500 e-mini down 0.2% and Nasdaq futures falling 0.4%.

Regional markets reflected the divergence. Japan’s Nikkei 225 gained 0.4%, though volatility rose after reports that trade negotiator Ryosei Akazawa cancelled a U.S. visit tied to the July trade deal. Korea’s KOSPI rose 0.3% after the Bank of Korea left rates steady at 2.5%, in line with expectations.

In contrast, Hong Kong’s Hang Seng fell 1%, dragged by a 9.7% plunge in Meituan after the food delivery giant reported weaker second-quarter profits. This decline underscores a causal link between earnings disappointment and broader market drag in sectors already facing competitive and regulatory headwinds.

Dollar Weakens as Fed Independence Questioned

Currency markets focused on political uncertainty around the U.S. Federal Reserve. The dollar weakened as traders priced in an 88.7% chance of a 25bp rate cut in September, up sharply from 61.9% a month ago, according to CME’s FedWatch.

President Trump’s move to fire Fed Governor Lisa Cook, combined with his ongoing pressure to cut rates, has raised questions about central bank independence. While Fed Chair Jerome Powell has resisted more aggressive cuts, markets interpret Trump’s influence as tilting the Fed toward easier policy. The dollar dipped 0.1% to ¥147.28, while the euro gained 0.1% to $1.1647, extending a three-week rally.

Commodities Slip as Oil and Gold Ease

In commodities, Brent crude slipped 0.5% to $67.74 per barrel, giving back part of recent gains as investors weighed U.S. tariff policies and slowing demand indicators. Spot gold edged 0.2% lower to $3,391.60 per ounce, after touching a two-week high earlier in the week, reflecting cautious positioning amid Fed policy uncertainty.

Asia’s muted response to Nvidia’s earnings highlights the fragility of investor sentiment. While corporate results remain strong, geopolitical tensions and Fed independence concerns are exerting a stronger pull on market direction. With high expectations already priced in, Asian markets are increasingly reactive to U.S. political uncertainty and trade frictions, leaving volatility elevated heading into September’s Fed meeting.

Source: Reuters

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What happened in the U.S session?

Overnight, U.S. markets were driven by robust GDP data, inflation metrics, and technology sector headlines, especially tariffs affecting semiconductors, with equities, tech stocks, the dollar, and bonds most influenced by these releases and news. The Personal Consumption Expenditures (PCE) price index increased by 2.1%, while core PCE inflation (excluding food and energy) rose to 2.5%. Recent CPI and producer price inflation numbers indicated persistent pricing pressures, complicating expectations for Fed rate cuts.

What does it mean for the Asia sessions?

Asian markets remain highly sensitive to policy decisions, tech sector developments, and global macroeconomic shifts. On August 28, Chinese equities risk a correction after a strong rally, South Korea’s rate decision and Japan’s inflation readings are pivotal for local FX, and U.S. data releases and Fed speeches hold global significance for risk assets. Monitor these events for trading opportunities and volatility triggers. Hong Kong’s surge stalled amid volatility from U.S. news and China policy uncertainty; Singapore’s Straits Times Index remains stable with localized equity catalysts such as logistics and healthcare

The Dollar Index (DXY)

The US Dollar is experiencing broad-based gains today due to strong economic data, hawkish Federal Reserve messaging, and easing trade uncertainties. Global instability, especially in Europe, is further enhancing its resilience against other major currencies. The currency is strengthening across most major pairs, largely due to positive economic data, resilient US fundamentals, and global geopolitical instability.Month-end technical buying is also contributing to dollar gains after recent declines.The Federal Reserve remains cautious and hawkish on interest rates, supporting the dollar’s position while uncertainty around global tariffs appears to be easing following new trade agreements.Central Bank Notes:

● The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.

● The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.

● Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.

● The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.

● In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.

● The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.

● As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.

● The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Gold prices on Thursday, August 28, 2025, are largely stable after recent gains, as global markets anticipate potential U.S. Fed rate cuts and watch key economic data releases. The price trend remains positive, with gold close to resistance levels and supported by economic uncertainty and investor demand. Strong resistance for gold is at $3,410, with the next resistance at $3,450. Support lies near $3,346 and $3,319. A sustained move above $3,396 could lead bulls to target higher prices. A drop below $3,300, however, would weaken the bullish outlook.Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

The Australian Dollar has shown resilience today due to a positive surprise in inflation, which has shifted expectations for monetary policy. This, combined with a slightly weaker US Dollar amid political and economic uncertainty, saw the AUD climb toward the important 0.6500 level, with further gains possible if sentiment remains supportive. Australia’s Monthly Consumer Price Index (CPI) for July rose 2.8% year-over-year, notably surpassing forecasts of 2.3%. The spike was largely due to higher electricity prices stemming from the expiry of rebates, alongside increased costs for food, alcohol, and housing.

Central Bank Notes:

● The RBA held its cash rate steady at 3.85% at the August meeting on 11–12 August 2025, maintaining its stance after keeping rates unchanged in July. The decision was widely expected, reflecting confidence that inflation is settling sustainably within the target.

● Inflation continues to moderate, though headline outcomes for the September quarter are not yet available. Timely indicators suggest price pressures in housing-related services and insurance remain elevated, even as tradables inflation stays subdued.

● The RBA’s preferred measure, trimmed mean inflation, is estimated to track close to 2.8 — 2.9%, signaling continued progress toward the midpoint of the 2–3% target range. Headline CPI is likely near 2.3%, subject to volatility in energy and food prices.

● Global conditions remain a source of uncertainty. The market reaction to ongoing U.S.–EU trade frictions has tempered slightly, but volatility persists across equity and commodity markets. These developments continue to feed into Australia’s trade outlook and business sentiment.

● Domestic demand showed further signs of recovery. Household consumption strengthened modestly over the winter months, helped by improving real incomes and a stabilizing housing market. However, business investment intentions remain mixed, with service industries stronger than manufacturing and construction.

● Labour market conditions remain relatively tight, but indicators point to reduced momentum compared with the first half of 2025. Job vacancies have eased, and while employment growth continues, underutilization edged slightly higher for the first time this year.

● Wage growth has moderated further, consistent with easing labour demand, though unit labour costs remain above average due to weak productivity performance. The RBA continues to flag productivity as a medium-term risk to cost dynamics.

● Forward-looking indicators suggest consumption growth may be softer than previously assumed, with households cautious despite modest income gains. Elevated rents and high borrowing costs continue to weigh on discretionary spending.

● The Board reasserted the risk that household spending may underperform forecasts, potentially dampening business conditions and leading to weaker labour demand if confidence fails to strengthen.

● The overall stance of monetary policy remains mildly restrictive, consistent with inflation outcomes near target and ongoing progress toward balance in the economy. The Board judged it prudent to leave rates unchanged, while emphasizing that adjustments remain contingent on incoming data.

● The Reserve Bank reaffirmed its commitment to price stability and full employment, noting its readiness to adjust settings if conditions diverge materially from baseline projections..

● The next meeting is on 8 to 9 September 2025.

Next 24 Hours Bias

Weak BearishThe Kiwi Dollar (NZD)

The New Zealand Dollar (NZD) remains under pressure today, Thursday, August 28, 2025, largely due to a dovish stance from the Reserve Bank of New Zealand (RBNZ), subdued economic data, and continued risk-off sentiment in global markets. The NZD/USD exchange rate is currently around 0.5858, reflecting a modest recovery from recent lows but still down 1.9% over the past month and 6.2% over the last year.Central Bank Notes:

● The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 25 basis points to 3.00% on 20 August 2025, marking a three-year low and continuing the easing cycle after July’s pause. The vote was split 4-2, with two members advocating a 50-basis-point cut, highlighting diverging views within the Committee.

● Policymakers indicated that significant uncertainty and a stalling economic recovery prompted this move, leaving the door open for further rate cuts later in the year, with a possible trough around 2.5% by December.

● Annual consumer price index inflation rose to 2.7% in the June quarter and is expected to reach 3% for the September quarter—at the upper end of the MPC’s 1 to 3% target band—but medium-term expectations remain anchored near the 2% midpoint..

● Despite the near-term uptick, headline inflation is projected to return toward 2% by mid-2026, as tradables inflation pressures ease and significant spare capacity continues to dampen domestic price momentum.

● Domestic financial conditions are broadly aligning with MPC expectations, as lower wholesale rates have translated into reduced borrowing costs for households. However, declining consumption and investment demand, higher unemployment, and subdued wage growth reflect ongoing economic slack.

● GDP growth stalled in the second quarter of 2025, contrasting with earlier projections. High-frequency indicators point to continued weakness driven by rising prices for essentials, weakening household savings, and constrained business lending.

● The MPC cautioned that ongoing global tariff uncertainties and policy shifts, especially recent changes in US trade regulations, could amplify market volatility and present both upside and downside risks to New Zealand’s recovery.

● Subject to medium-term inflation pressures continuing to ease as projected, the MPC signaled scope for further OCR cuts, possibly down to 2.5% by year-end, consistent with the latest Monetary Policy Statement outlook.

● The next meeting is on 22 October 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

The Japanese Yen is fairly stable, with incremental appreciation and low volatility against major currencies. Consumer inflation in Tokyo remains elevated but improved slightly, fueling ongoing rate hike speculation. Financial and fiscal developments, including corporate actions and government budget increases, round out active market sentiment for August 28, 2025. The USD/JPY exchange rate remains stable, most recently quoted around 147.25 with only fractional daily and weekly movement (-0.122% since yesterday, -0.054% over the past week).

Central Bank Notes:

● The Policy Board of the Bank of Japan decided on 31 July, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:

● The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.

● The BOJ will maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.

● Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.

● On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.

● The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.

● Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.

● With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.

● There are multiple risks to the outlook, with especially elevated uncertainty regarding the future path of global trade policies and overseas price trends. The BOJ will continue to closely monitor their impact on financial and foreign exchange markets, as well as on Japan’s economy and inflation.

● The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours BiasWeak Bearish

Oil

Oil prices declined slightly on August 28, 2025, as global markets reacted to lower-than-expected U.S. stockpile draws, rising OPEC+ output, and new U.S. tariffs on Indian exports, with forecasts indicating that prices may continue to decrease into the year’s end. Over the past month, crude prices have fallen more than 4%, with oil down roughly 14% compared to last year. Short-term forecasts indicate continued moderate declines, with prices expected to average around $58 per barrel going into Q4 2025 due to accelerated OPEC+ output and inventory builds.

Next 24 Hours Bias

Weak Bullish

Source: IC Markets

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Daily News

[Quick Facts]

1. Volodymyr Zelensky announces Ukraine-U.S. delegation meeting in New York on 29th.

2. White House economic adviser urges Fed Governor Cook to take leave amid legal proceedings.

3. U.S. Treasury secretary calls for internal Fed review, cites Cook's mortgage fraud allegations.

4. New Zealand business confidence rises further in August as inflation cools.

5. Williams: Every FOMC meeting is a "live" decision.

[News Details]

Volodymyr Zelensky Announces Ukraine-U.S. Delegation Meeting in New York on 29th

On August 27 (local time), Ukrainian President Volodymyr Zelensky stated in a video address that Ukrainian and U.S. delegations are scheduled to hold a meeting in New York, U.S., on the 29th.

According to Zelensky, the Ukrainian delegation—led by Presidential Chief of Staff Andriy Yermak and Secretary of the National Security and Defense Council Rustem Umerov—will first visit Switzerland on the 28th before proceeding to the U.S. for discussions with American counterparts. The talks are expected to cover military, political, and economic dimensions of security guarantees for Ukraine.

Zelensky underscored the urgency of accelerating negotiations on security assurances.

Prior to this, U.S. Special Envoy for Middle East Affairs Steve Witkoff indicated on the 26th that he would meet with Ukrainian representatives in New York this week to advance diplomatic efforts aimed at ending the Russia-Ukraine conflict.

White House Economic Adviser Urges Fed Governor Cook to Take Leave Amid Legal Proceedings

Kevin Hassett, Director of the White House National Economic Council, suggested on Wednesday that Federal Reserve Governor Lisa Cook should take a temporary leave of absence while legal proceedings regarding her tenure at the central bank remain unresolved.

"If I were in her position, I would step aside now—it would be the proper course of action," Hassett told reporters. He further asserted that the President retains the authority to dismiss Cook, stating, "The President absolutely has the right to remove a Fed governor for cause, and in my view, the allegations against her are serious."

The remarks came after President Trump notified Cook in a letter on Monday that she had been summarily dismissed from her post. The termination followed allegations from White House allies that Cook had improperly listed two separate properties as primary residences in mortgage applications.

Notably, Trump had previously floated Hassett's name as a potential nominee for the next Federal Reserve Chair, adding political undertones to the unfolding controversy.

U.S. Treasury Secretary Calls for Internal Fed Review, Cites Cook's Mortgage Fraud Allegations

US Treasury Secretary Scott Bessent on Wednesday once again called on Federal Reserve Chair Jerome Powell to conduct an internal review of the Fed and include the mortgage-fraud allegations against Fed Governor Cook in the scope of the review.

In an interview with the Fox Business Network (FBN), Bessent said, "I encourage Chair Powell to conduct an internal review before an external one. This is something that needs to be addressed," referring to the Cook incident.

Bessent said, "We haven't heard her say 'I didn't do it'. All she keeps saying is that the president can't remove her." He stated that in his view, if a Fed official is suspected of mortgage fraud, they should not serve in one of the major financial regulatory bodies in the US.

The Fed is an irresponsible institution. Its relationship with the American people relies on a high level of trust, and incidents like this undermine that trust.

New Zealand Business Confidence Rises Further in August as Inflation Cools

A survey released by ANZ Bank on Thursday showed that business confidence in New Zealand rose in August. With inflation indicators easing, businesses anticipate better business conditions in the future. A net 49.7% of respondents expect the economy to improve in the coming year, up from 47.8% in July. Meanwhile, 38.7% of respondents expect their own businesses to grow, compared with 40.6% in July.

Sharon Zollner, the chief economist at ANZ Bank, said it's too early to judge the impact of the stance change this month on confidence, but they believe it will reinforce the current economic recovery.

Williams: Every FOMC Meeting is a "Live" Decision

New York Fed President John Williams said in a speech on Wednesday that the progress in inflation has slowed, and it is difficult to distinguish the impact of Trump's tariffs from other factors. He estimated that a 0.4% to 0.5% increase in the core Personal Consumption Expenditures (PCE) might be related to the impact of tariffs. Currently, he is "very carefully" observing inflation in the service sector.

The U.S. economy "is going through an adjustment process," and the annual GDP growth rate is expected to be between 1% and 1.5%. This indicates that the economic growth rate has slowed compared to the early stage of the cycle, but it still remains in the positive-growth range. It means that the economy is slowing down rather than stagnating.

The labor market remains solid but is cooling. The unemployment rate stands at 4.2%, which is still at a historically low level, although the pace of hiring has slowed. He said that wage growth still aligns with the trend of moderate inflation.

"Every meeting is, from my perspective, live", for a change in the benchmark policy rate. The current interest-rate level is "moderately restrictive," which means that the Fed can "lower interest rates while still maintaining a certain degree of restrictiveness. But we still need to accurately understand what is happening in the economy."

[Today's Focus]

UTC+8 16:00: ECB Governing Council Member Olli Rehn Speaks

UTC+8 17:00: Eurozone Economic Sentiment Indicator for August

UTC+8 19:30: ECB Releases Minutes of July Monetary Policy Meeting

UTC+8 22:00: Monthly Rate of Pending Home Sales Index in the US for July

TBD: The US Imposes an Additional 25% Tariff on India, with the Total Tariff Rate Reaching 50%

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US Shares Higher Ahead of Nvidia – Dow up 0.3%

US shares pushed higher in trading yesterday, with the S&P notably notching up another record close as investors awaited key Nvidia earnings after the bell. Nvidia came in close to expectations, but the share price dropped on China business concerns moving forward. The Dow gained 0.32% to 45,565, the S&P added 0.24% to 6,481, and the Nasdaq added 0.21% to 21,590. Treasury yields dipped further, with the 2-year down 3.7 basis points on the day to 3.609% and the 10-year down 2.7 basis points to 4.234%, while the dollar traded in relatively tight ranges, with the DXY down just 0.03% to 98.20. Oil prices pushed higher after US inventories dipped again, with Brent up 0.82% to $67.77 and WTI up to $63.83 a barrel. Gold held near recent multi-week highs, up 0.11% to $3,397.37 on the close.

Inflation Numbers Come into Focus for Markets

We are fast approaching another New York Friday trading session that will see a key update from the US, which could be instrumental in influencing Fed rate cut expectations. In the last few weeks, we have had key Non-Farms numbers, a key speech from Jerome Powell, and now we have the Fed’s favoured inflation indicator—the Core PCE Price Index data—in the last session of the week. Markets are particularly vulnerable in the final session of the week, with liquidity tending to decrease rapidly in the last few hours, and moves off key updates can be exacerbated. This week’s update is key to locking in a heavily expected rate cut in September. Market expectation is for another 0.3% increase in the month-on-month data and a 2.9% year-on-year figure, and the latter could cause some issues with current bets, especially if we get a higher print. The market is currently pricing in an 88% chance of a rate cut next month, but expect that to change dramatically if we see a stronger inflation reading, which could lead to some sharp moves in the market on Friday afternoon.

US Data in Focus Later Today

Asian markets look set to fall on the open today after Nvidia posted a good earnings report but advised that the forward outlook is slowing. There is little on the event calendar in the Asian session today, and traders are predicting more range-bound markets with a downside skew. The European session will see the early focus on Swiss markets with the latest Quarterly GDP data due out. Expectation is for just a 0.1% increase, and traders are expecting volatility in the franc around the event. The main fundamental updates for the day fall in the New York session, with some key US numbers due out. The Quarterly Preliminary GDP numbers are due (exp. 3.1%) alongside the usual Weekly Unemployment Claims data (exp. 231k), and anything off expectations could see some big moves across financial products. Pending Home Sales numbers (exp. -0.4%) are out later in the session, and then we are set to hear from the FOMC’s Christopher Waller later in the day, with any Fed updates closely watched given recent news.

Source: IC Markets

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IC Markets Asia Fundamental Forecast | 28 August 2025

What happened in the U.S session?

What does it mean for the Asia sessions?

The Dollar Index (DXY)

Gold (XAU)

The Australian Dollar (AUD)

Weak BearishThe Kiwi Dollar (NZD)

The Japanese Yen (JPY)

Source: IC Markets

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General Market Analysis – 28/08/25

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Source: IC Markets

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